Restructuring Is Cheaper Early, and Nobody Believes It

There is a predictable pattern in businesses that do not survive a downturn. The problem was visible, the response was deferred, and by the time it became unavoidable the range of available responses had collapsed to the least attractive ones.

Restructuring while a business is still solvent, still banked and still trading is a negotiation. Restructuring after those things have changed is a process someone else controls. The work itself is identical (cost base, debt structure, working capital, compliance position), but the leverage is not.

Having traded through every cycle this economy has had since 1983, the pattern we see is that the businesses which come through are rarely the ones that were strongest going in. They are the ones that moved while moving was still their own decision.

This is an unpopular argument to make, because acting early means spending money and management attention on a problem that has not yet hurt. That is precisely what makes it cheap.